TaxTMI 
TaxTMI 
2017 (7) TMI 966
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....earch action under section 132 of the Income Tax Act ['the Act' for short] was carried out in the group cases of the respondent-assessee on 08.12.2009. During such search, the assessee had made disclosure of Rs. 3,05,47,400/- as undisclosed income. Subsequently, the return of income was filed in response to notice under section 153A of the Act declaring total income of Rs. 3,11,74,590/-. The assessee had also offered the income admitting the statement recorded under section 132(4) of the Act for taxation in the return filed for the assessment year 2010-11 and tax along with interest was also paid. 3. Despite such fact, the Assessing Officer proceeded to impose penalty under section 271AAA of the Act amounting to Rs. 30,54,750/-. Th....
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....h sum. The Assessing Officer imposed a penalty on the ground that the assessee failed to substantiate the manner of earning the income. However, CIT (Appeals), as noted, concluded that no question was asked by the departmental representatives (in the course of recording the statement under section 132(4) of the Act) regarding the manner of earning such income. It was, on this basis, that the CIT (Appeals) as well as the Tribunal found that the Assessing Officer committed an error in imposing penalty. 6. As is well known, section 271, providing for penalty for concealment of income etc., contained an Explanation 5 inserted w.e.f. 01.10.1984 and held the field till introduction of Explanation 5A w.e.f 01.06.2007. Under this Explanation 5, pr....
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....er in which the income is derived, the Revenue cannot impose penalty on the premise that the assessee did not make nay such disclosure. It was held and observed as under: "10. Under Section 132(4) of the Act, it is the authorised officer, who examine on oath any person, who is found to be in possession or control of any books of account, document, money, bullion, jewellery or other valuable article or thing, therefore, it is on the authorised officer to record the statement in his own way. Therefore, it is not expected from the person to state those things, which are not asked by the authorised officer. 11. It is a matter of common knowledge, which can not be ignored that the search is being conducted with the complete team of the offi....
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....n derived. It can be inferred on the facts and circumstances of the case, in the absence of anything to the contrary. Therefore, mere nonstatement of manner in which such income was derived would not make the Explanation 5 (2) inapplicable." 9. Similar situation arose before this Court. Division Bench in case of Commissioner of Income Tax vs. Mahendra C Shah reported in 299 ITR 305 adopted the same logic as that of the Allahabad High Court and observed as under: "15. In so far as the alleged failure on the part of the assessee to specify in the statement under Section 132(4) of the Act regarding the manner in which such income has been derived, suffice it to state that when the statement is being recorded by the authorized officer it is....
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....the recording of the statement under section 132(4) of the Act in the context of the requirement of the assessee to disclose the manner in which the undisclosed income was derived in order to avoid penalty. The High Court in case of Commissioner of Income Tax vs. Mahendra C.Shah, in particular, observed that considering the social environment, it is not possible to expect from an assessee to be specific and to the point regarding the conditions stipulated by exception No.2 while making statement under section 132(4) of the Act. The Court went on to observe that if the income is declared and tax is paid thereon, there would be substantial compliance. 11. It is this principle which the CIT (Appeals) and the Tribunal have applied in the prese....
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....ssessee having to substantiate the manner in which, the undisclosed income was derived. It is this requirement which the counsel for the Revenue would place great emphasis on. According to her, onus is now entirely shifted on the assessee not only to make a disclosure of the undisclosed income but also to specify the manner, in which, the income has been derived and to substantiate the same. It was therefore, contended that the earlier decisions of this Court in case of Commissioner of Income Tax vs. Mahendra C.Shah and the decision of Allahabad High Court in case of Commissioner of Income Tax vs. Radha Kishan Goel rendered in backdrop of different statutory provisions would not automatically apply. 14. We do not reject this contention tot....